Barbell Logic

Building on the personal finance episode that aired as #157, which focused on getting rid of debt, Matt and Scott talk to Jesse Mecham, the founder of You Need A Budget as well as an SSOC client. You Need A Budget (YNAB) is a philosophy of budgeting based on four simple rules of money management, with some handy software tools to take the tedium out of spreadsheet data entry. This ground-up approach to budgeting bears a strong resemblance to Starting Strength's method of barbell training, starting with first principles and building toward clearly defined, actionable goals.

Jesse developed his rules as a young married man in a graduate program of accounting with a subsistence income between himself and his wife. They didn't have money, but they did begin the conversation about budgeting early in their relationship. On a fateful day a year after buying his first car, Jesse received a letter from the state department of motor vehicles informing him of the need to renew his registration... for a fee of $150. A large (and unforeseen) sum to him -- he had never owned a car before -- it highlighted the need to think about the known but irregular expenses of life and budget for them ahead of time, so he wouldn't be caught off guard. Eventually this idea worked it's way into his budgeting spreadsheet, which he offered for sale online, and You Need A Budget was born.

A complete exploration of Jesse's money rules can be found on the YNAB site, but they can be summarized as follows (and they follow sequentially):

Give every dollar a job -- what you have in account today, right now. Give those dollars a job: gas, food, electric bill. Embrace your true expenses -- not just what you spent today, or will spend this week, or this month... EVERYTHING, including car tires, registration, insurance premiums, etc. Roll with the punches -- your money works for you. You get to decide what jobs your dollars will have, which means you also get to decide when it's time for them to change jobs. Age your money -- spend the money you earned last month for this month's rent. Then work toward spending money from last quarter on this month's rent, and so forth. Now you have created savings, you have dollars for an emergency fund, and you can begin investing to create wealth.

Just as Starting Strength doesn't tell you to do strong things on Day 1 (like, perform a max effort single), Jesse's rules don't tell you to make huge changes or look far out into the future at the beginning. Instead he focuses on where a person is now, in the present moment (i.e. their current account balance, not the paycheck they expect to receive at the end of next week), and helps them start allocating the resources they have. Once those resources are accounted for, the person can then start thinking about what to do with their future paycheck. A linear progression of sorts.

Barbell Logic listeners can get their first year of You Need A Budget FREE. Sign up for SSOC with the discount code YNAB to save $84 off your first month, which will cover the cost of a year's worth of You Need A Budget.